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Will The Emotional Mood Experiment Hurt Facebook?

Probably not:

Facebook has received immense media coverage recently for a scandal that broke last week. The social media giant was secretly testing newsfeeds with emotional posts to monitor sentiment and users were furious. The study involved academics from the University of California and Cornell that channeled the flow of user comments, videos, pictures and links to reduce the exposure to positive content while another study reduced the flow of negative posting. The mood experiment occurred for one week in early 2012 and the results are now public.

The study showed people were impacted by the types of content they were exposed to, as expected, but politicians, lawyers and internet activists were outraged after finding such a study had been conducted. Around the globe investigations are brewing but the tests have failed to garner widespread activism from people using the platform. The Facebook mood experiment has caught the attention of the Federal Trade Commission and a formal complaint has been filed by the Electronic Privacy Information Center. The main issue was that users weren’t specifically told they would be part of a study and the terms of agreement on this particular issue are unclear.

The big question revolves around user participation, adoption and engagement. Will users take to another social media site now based on the study? It seems unlikely and because Facebook is the leading social media site, the network effects of starting a competing social media site are lower with each additional new user. One social media competitor Orkut, just recently announced it would be folding due to the proliferation of Facebook and its inability to grow a significant user base outside of Brazil and India.

To Facebook’s credit, studies like this to improve user experience occur all the time from various sites and only a fraction of users were impacted. It’s also important for the social media site to know the true value of negative posts versus positive content sharing and how it impacts user engagement to continue expanding. In short, if your friends are having a bad day, it would be useful for Facebook to monitor how negative posts have become to determine if people will avoid the site, hence lowering profitability. Wall Street and Main Street should be happy these tests are being conducted to some degree.

Facebook will be announcing earnings on July 23 for the fiscal quarter ending June 2014 and revenue growth could be close to 25 percent for next year especially via mobile devices which was a concern after the IPO. Earnings will probably more than double compared to the same quarter last year. The social media site will gain impressions from the World Cup in Brazil and the experiment should have no lasting effects if the company can convince users the findings will be used to improve the site, were not done maliciously because the research was published in a scholarly journal instead of hidden. Facebook could also benefit from an improved user agreement and further explain potential related privacy issues to increase public relations along with further outreach. After a near 10 percent decrease in share price over the last few days, this could be an opportunity for those looking to invest. The possible expansion to China would increase its potential user base exponentially.